Nifty Bank outlook: A close above 41,200-41,500 range crucial for recovery; SBI, Canara Bank may do well

Nifty Bank ended last week at 40,608.65, up 3.08 per cent. During the week, the index traded in a range of 39,273.75-40,690.40 levels. One of the top Nifty Bank gainers for the week was IndusInd Bank. The bank stock jumped 5.78 per cent for the week. Bandhan Bank lost 3.62 per cent during the same period.

Nifty Bank has surged above the support of the 20 DMA, forcing the bears to remain on the sidelines.  Indicators such as RSI and MACD are positively skewed on the daily time frame.

Nifty Bank April futures last quoted with a premium of 223 points. Nifty Bank Put options distribution shows that the 39,500-strike followed by 39,000, have the highest open interest (OI) concentration, which may act as support for the current expiry. The Nifty Bank Call strike of 42,000 witnessed significant OI concentrations and may act as resistance for the current expiry. 

On the weekly chart, the banking index has formed a ‘Morning Star’ pattern, indicating a sign of reversal.  The index has also bounced back from 0.38 per cent of Fibonacci Retrenchment on the weekly chart.

PSU banking stocks would show some bounce back in coming days and that it would be a good time to enter them for short-term buying. Additionally among private banks- ICICI Bank and HDFC Bank could lead the index higher. Among PSU banks, Canara Bank and SBI can hold the command.

The Nifty Bank started the month with a relatively high OI base. However, Friday's rally was mostly short coverings, the affirmative move would be concluded once sustained above the 41,500 level.

Nifty Bank outperformed the Nifty in the expiry week.  Going forward, we believe a close above VWAP level of 41,200-41,500 will be crucial for a further recovery. 

 

(The author of this article is Executive Director at Choice Broking)

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